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Since his election, President Obama and his top aides have frequently cast the economic crisis as an opportunity to push his agenda of change. Now, three months into his presidency, we are getting a good sense of how he and the Democratic Congress intend to use that opportunity.
Their priorities are becoming clear: Providing health coverage for many uninsured, cutting taxes for those making $200,000 or less, and, though this one may be receding into the distance, addressing global warming. Equally important, we’ve learned what long-term priorities are falling off Obama’s A-List: confronting the budget deficit, reforming taxes and entitlements, and constraining health costs.
There is a clear and unsurprising pattern here: Obama is going for the most politically palatable rather than the tough choices. For instance, while covering the uninsured is by no means simple, it is a far easier political lift than controlling medical costs. That, after all, would require some form of rationing—an exceedingly unpopular step.
The tax story is the same. Combining big tax cuts for more than 95 percent of individuals and families while significantly increasing federal spending is not sustainable over the long-term. Similarly, Obama aides say he supports tax reform, and the President has just appointed a new commission to study the subject. But Obama has imposed so many constraints on this initiative that it cannot possibly succeed. For instance, he has decreed that no one making less than $250,000 would pay more taxes. As my colleague Rosanne Altshuler wrote the other day, serious tax reform is not possible in such an environment .
As a result, addressing the long-term deficit has also fallen by the wayside. Reducing the red ink will inevitably require a mix of significant tax increases and spending reductions. It would also mean reforming Social Security and, especially, Medicare.
Obama had expressed some interest in confronting Social Security but that seems to have been scotched by Hill Democrats. And for now Medicare reform looks as if it will be an exercise in shifting money around, rather than slowing spending growth to something approaching GDP.
Putting the brakes on medical costs would be a huge accomplishment since these expenses have been growing at a staggering 2 percentage point faster than GDP for years. However, while Obama talks about “bending the curve” in medical spending, I don’t see proposals that will do that. He is leaving the details of health reform to Congress, and lawmakers seem more interested in nibbling around the edges of the cost problem. For instance, doctors may get higher Medicare payments, while hospitals and nursing homes would receive less, patients would pay a bit more, and Medicare Advantage managed care plans would lose their government subsidies. Whether you like these ideas or not, it is hard to believe they will significantly reduce health costs.
It is hard to criticize Obama for avoiding the really tough choices. After all, nearly any politician would do the same. And a recession is no time to be cutting spending or raising taxes. But Obama will never get on the road to change we can believe in by continuing the duck the really tough calls.
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